I am asked this question on a daily basis. Put simply, the purpose of Business Plan is to provide a strategic measurement to gage a business venture.
For a start-up or new venture the purpose can range from determining if the idea is worth pursuing to securing funding. Whether you are seeking a bank loan, SBA Loan, Venture Capitalists funding or an angle investor, all require a detailed QUALITY Business Plan. A Business Plan breaks down a potential investment in terms investors understand.
For an existing business a Business Plan is also helpful. Why would a successful business need a Business Plan? A common miss conception is to go straight to a strategic plan. Yes, a strategic plan is important; however it is just one component of a complete Business Plan. A more comprehensive picture is much more beneficial and accurate. A Business Plan can help determine where to go from here. It gives the owner an idea about how to expand and to ensure the roots of the company are strong. Small business owners have a tendency to become intimately involved in the daily operations of the business and fail to look at the big picture. This is dangerous and can stunt the company’s growth. It is strongly recommended that a third party is used to write the plan. This eliminates any bias as well as provides a better picture of a business. A good Business Plan helps owners strategically assess the company, keep goals and measure success.
A detailed well prepared Business Plan provides a road map to success for an individual company in a given industry. Knowing your strengths, weaknesses, and threats is immensely helpful when entering or competing in an industry.
Majority of individuals fail to prepare a quality accurate plan. The sections that tend to be skewed are the potential market and the financials. Nearly everyone over estimates the market and investors look for these simple errors. Remember to be realistic and predict for the worst case.
At Kovacs Consultants we believe that a Business Plan separates a successful venture from an expensive hobby.